Thanks Trump: Already Expensive iPhones Will Soon Become a Real Luxury

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Donald Trump has just announced his intention to impose additional 10% tariffs on Chinese imports upon his return to the White House, a measure that will affect the cost of technology products in the United States. The Republican president made this statement on his favorite social network, Truth Social. The main argument is based on… the opioid crisis that the United States has been going through since the 1990s, and more specifically the fentanyl crisis, which kills tens of thousands of people each year. Here is his statement:

«I have had many discussions with China about the massive amounts of drugs, particularly fentanyl, that are being shipped into the United States – but to no avail. Chinese officials told me that they would apply their maximum penalty, which is the death penalty, to any drug trafficker caught, but unfortunately, they never did. Drugs continue to flood our country, primarily through Mexico, at levels that have never been seen before. Until they stop, we will impose an additional 10% tariff on China, on top of all the other tariffs already in place, on all of their many products entering the United States of America ».

The mechanics of tariffs: cascading effects on the global market

The arithmetic of tariffs masks an economic complexity that is rarely explained. Contrary to popular belief, these measures do not directly penalize China, but create a domino effect that spreads well beyond the borders of the United States, even though the country's residents will be the first to be affected.

In the case of Apple, the mechanism is particularly revealing: when the Californian company imports iPhones assembled in China, it must pay customs duties directly to the US Treasury, mechanically increasing its import costs.

This increase in costs will present Apple with a strategic dilemma. The firm can either absorb these additional costs and reduce its margins – an unlikely option given its profitability policy – ​​or pass them on to its sales prices. However, Apple has traditionally applied a consistent global pricing policy, avoiding large gaps between markets in order to limit parallel trade and maintain its premium brand image. A price increase in the United States would therefore probably lead to a global price adjustment.

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The impact would then cascade. Other smartphone manufacturers, anxious to maintain their margins in the face of Apple's price increases, could also align their prices upwards. This dynamic would affect not only the American market, but also the Old Continent, Asia and all markets where the Apple brand often serves as a reference for the sector's price positioning.

In the worst case, consumers around the world could see the cost of premium smartphones increase, regardless of their geographic location.

Apple between a rock and a hard place

During Trump's first term, Apple narrowly escaped a 15% tax thanks to a last-minute trade deal in December 2019. However, other products from the brand, such as the Apple Watch and AirPods, did not benefit from this leniency. This time, the company could see its margins seriously affected.

Faced with these recurring tensions, Apple is accelerating its geographic diversification strategy. India is gradually becoming a major manufacturing hub for the iPhone, reflecting a desire to reduce its dependence on China. However, this transition will take time and will not avoid the immediate impact of the new taxes.

This announcement, of course more moderate than the threat of 60% tariffs brandished during the campaign, suggests a slightly more down-to-earth approach to trade policy. It is nonetheless extremely worrying for American consumers, and by snowball effect, for consumers around the world who could see the price of their phones, tablets or computers increase significantly in the coming months. Under the guise of resolving the most serious American health crisis of this century, Mr. Trump is therefore providing new ammunition to intensify the Sino-American trade war.

• Donald Trump is planning an additional 10% tariff on products imported from China, justified by the fentanyl crisis.
• Apple and other manufacturers could pass these costs on to consumers, raising the prices of smartphones and technology products worldwide.
• Apple is accelerating its diversification into India, but this strategy will not be enough to avoid an immediate impact of the new taxes.

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